Investors await Fed decision

Market Outlook :

This week, we expect US Q4 GDP to stay firm with main support coming from stockbuilding. Durable goods orders should have expanded by 2% mom in December.

In Europe, we could see the German Ifo business confidence show a moderate gain in January while Japanese industrial production for December is set to give back some ground after strong gains in recent months.

We expect the Fed to leave monetary policy unchanged but will look for changes to growth and inflation guidance.

Focus on Equities :

Regarding the earnings season up to now, figures are mostly better than expected or at least in line with expectations. Only 10% so far disappointed.

Nevertheless, investors want more than just nice figures, as guidance and management comments were very often a good excuse to take some profit. We still favour the higher beta sectors as we foresee a further positive momentum in the medium term, but the short term picture has become a bit more tricky.

Foreign Exchanges :

The euro/dollar price faces important resistance at 1.2900/1.2985. We'll probably see a further consolidation over the next weeks between this resistance level and the support level of 1.2315/1.2135.

Only a clear break above 1.2985 would suggest that a further rise to 1.3200 were already at hand. The October support line for the dollar/yen price currently lies at 105.45/105.25. Only a move above the previous 107.90 top would break the downtrend pattern suggesting further gains back to 110.00.

But as long as such a break is not seen, it is better to stick with the trend, which remains downward.